Solutions manual for personal financial planning 14th edition by billingsley

Solutions Manual for Personal Financial Planning 14th Edition by Billingsley Full clear download( no error formatting) at: http://downloadlink.org/p/solutions-manual-for-personal-financial-planning-14th-edition-by-billingsley/ Test Bank for Personal Financial Planning 14th Edition by Billingsley Full clear download( no error formatting) at: http://downloadlink.org/p/test-bank-for-personal-financial-planning-14th-edition-by-billingsley/

Using Financial Statements and Budgets Chapter 2

How Will This Affect Me? Americans do not prepare a detailed household budget and about 75 percent do not have enough savings to cover 6 months of expenses. These are scary numbers . . . and this chapter shows what you can do to avoid being part of these alarming statistics.

Everyone knows that it’s hard to get where you need to go if you don’t know where you are. Financial goals describe your destination, and financial statements and budgets are the tools that help you determine exactly where you are in the journey.

This chapter helps you define your financial goals and explains how to gauge your progress carefully over time.

Learning Goals LG1 Understand the relationship between financial plans and statements.

LG2 Prepare a personal balance sheet.

LG3 Generate a personal income and expense statement.

LG4 Develop a good record-keeping system and use ratios to evaluate personal financial statements.

LG5 Construct a cash budget and use it to monitor and control spending.

LG6 Apply time value of money concepts to put a monetary value on financial goals.

Facts or Fantasies Whereas the balance sheet summarizes your financial condition at a given point in time, the income and expense statement reports on your financial performance over time.

Because financial statements are used to record actual results, they’re really not that important in personal financial planning.

A lased car should be listed as an asset on your personal balance sheet.

Only the principal portion of a loan should be recorded on the liability side of a balance sheet.

Generating a cash surplus is desirable, because it adds to your net worth.

When evaluating your income and expenses statement, primary attention should be given to the top line: income received.

A True Statement “it’s hard to get where you need to go if you don’t know where you are” Financial Statements tell you where you are Balance Sheet reports your Assets, Liabilities, and New Worth as of a specified date Income Statement reports how you did over a period of time, month or year

Relationship between Financial Plans and Financial Statements

Š 2017 Cengage LearningŽ. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or i n part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Balance Sheet – Tells you where you are Problem 3 -- Worksheet 2.1 Names(s) Denise Fisher Assets Liquid Assets: Cash on hand $ Cash in checking Savings accounts Money market funds and deposits Certificates of deposit <1 yr to maturity Total Liquid Assets

Balance Sheet Date

70.00 150.00

650.00

$

Investments Stocks

$ 3,000.00

Bonds

500.00

Certificates of deposit <1 yr to maturity Mutual funds Real estate Retirement funds, IRA Other Total Investments Real Property Primary residence Second home Other Total Real Property Personal Property Autos Autos Recreational vehicles Household furnishings Jewelry and artwork Other Other Total Personal Property Total Assets

30-Jun-16 Liabilities and Net Worth Current Libaiblities Utilities $ 90.00 Rent Insurance premiums 220.00 Taxes 400.00 Medical/dental bills Repair bills

870.00 Bank credit card balances Department store credit card balances Travel and entertainment card balances Gas and other credit balances

400.00 190.00

Bank line of credit balances Other current liabilities

$ 68,000.00

$ 9,775.00

Total Current Liabilities Long-term Liabilities Primary residence mortgage $ 52,000.00 $ 3,500.00 Real estate investment mortgage Autos loans 3,000.00 Applicance/furniture loans 500.00 Home improvement loans $ 68,000.00 Single-payment loans Education loans Margin loans used to purchse securities Other long-term liabilities

1,050.00

$

1,300.00

Total Long-Term Liabilities

$ 55,500.00

Total Liabilities

$ 56,800.00

$ 11,725.00

Net Worth

$ 27,295.00

$ 84,095.00

Total Liabilities and Net Worth $ 84,095.00

900.00

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or i n part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Balance Sheet – Major Headings Assets:

Liabilities and Net Worth

Total Liquid Assets

Total Current Liabilities

Total Investments

Total Long-term Liabilities

Total Real Property

Total Liabilities

Total Personal Property

Net Worth

Total Assets

Total Liabilities and Net Worth

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or i n part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Net Worth Assets: The fair market value of what you own Liabilities: Current – Amount you owe that is due within one year

Long-term – Amount you owe that is due more than one year from date Net Worth: Assets – Liabilities = Net Worth What is Fair Market Value?

What you can sell an asset for, that is the Net Realizable Value

Amount you can buy the asset for, the Replacement Cost

Solvency You are Solvent when your Net Worth is positive You are Insolvent when your Net Worth is Negative

There is hope for yet!

Income Statement What you Earn and Where it Goes Personal Income Statements are prepared on the Cash Basis A method of preparing financial statements in which only transactions involving actual cash receipts or actual cash outlays are recorded.

Cash Surplus is an excess amount of income over expenses that results in increased net worth.

Income is Earnings received as wages, salaries, bonuses, commissions, interest and dividends, or proceeds from the sale of assets.

Expenses are Money spent on living costs and to pay taxes, purchase assets, or repay debt.

Income Statement â&#x20AC;&#x201C; Major Headings Worksheet 2.2

Income:

Expenses:

Wages and Salaries

Housing and Utilities

Self-employed income

Food

Bonuses and Commissions

Transportation

Investment income

Medical

Pensions

Clothing and Personal Care

Other income

Insurance and Taxes Appliances, furniture

Total Income

Recreation Other Total Expenses

How We Spend Our Income

Balance Sheet Ratios Solvency Ratio Total Net Worth divided by Total Assets Solvency ratio measures how much cushion you have before insolvency If you move from a Solvency ratio of 40 to a ratio of 30, Good or Bad? Liquidity Ratio Total Liquid Assets divided by Total Current debt (liabilities) Liquid assets include Cash, Savings Accounts, Money Market accounts, and Certificates of deposit.

Liquidity ratio shows how long you could continue to pay current debts with existing liquid assets If you liquidity ratio moves from 15 to 30, Good or Bad?

Balance Sheet/Income Statement Ratio s Savings ratio Relates cash surplus from Balance Sheet to net income from the Income Statement.

Savings ratio = Cash surplus divided by Net Income If Savings ratio moves from 15 to 20, Good or Bad? Debt Service Ratio provides a measure of the ability to pay debts promptly.

Debt Service ratio = Total monthly loan payments divided by monthly gross income If Debt Service ratio moves from 15 to 30, Good or Bad?

Budget s Cash budget reports the forecasted or estimated cash receipts and the forecasted or estimated cash expenses for the year.

By reporting the cash budget by month, you can identify the month that you may have a problem such as short of cash.

By comparing the actual cash receipts and expenses to the budget, you can control your spending. The difference is called a variance. If actual is greater than budgeted, you have a positive variance; otherwise, a negative variance.

Handling a budget Deficit Liquidate enough savings and investments or borrow enough to meet the total budget shortfall for the year Cut low-priority expenses from budget Increase Income

Time Value of Money A dollar today is worth more than a dollar received in the future. Relies on Compounding which is when interest earned each year is left in an account and becomes part of the balance on which interest is earned in subsequent years.

Future Value The value to which an amount today will grow if it earns a specific rate of interest over a given period.

Example: What will $1,000 amount to in two years if earns 10%? $1,000 * 1.1 * 1.1 = $1,210; Table of Future Values in Appendix A, gives a factor of 1.21 for 10% over 2 years.

Solutions Manual for Personal Financial Planning 14th Edition by Billingsley Full clear download( no error formatting) at: http://downloadlink.org/p/solutions-manual-for-personal-financial-planning-14th-edition-by-billingsley/ Test Bank for Personal Financial Planning 14th Edition by Billingsley Full clear download( no error formatting) at: http://downloadlink.org/p/test-bank-for-personal-financial-planning-14th-edition-by-billingsley/

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